Walmart's caution on consumer spending ahead of holidays sends shares lower

Walmart raised its annual sales and profit forecast on Thursday for the second straight quarter, but cautious comments from executives for the holiday season sent its shares down 7% in premarket trading.

The company said shoppers slowed purchases at the end of October, in contrast to spending patterns earlier in the quarter, echoing comments from other retailers that have seen sales ebb.

"There's just a flag that maybe there's reason to be a little more cautious on the consumer given some of what we've seen," Walmart's Chief Financial Officer John David Rainey told Reuters, adding that higher interest rates and declining household finances are issues of concern.

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The U.S. retail giant has used its size and scale to keep prices low despite inflation, drawing in not just low-income shoppers but also more high-income consumers looking for cheaper options to stretch their budgets.

Prices on food and consumables have been "more in check" than the prior year while prices of general merchandise goods like apparel and home goods have fallen between three and six percent, Rainey said.

Inflation overall fell to about 2% in the quarter for the U.S. retailer, which operates more than 5,300 stores in the United States.

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While shopper visits rose 3.5% in the third quarter, shoppers are "still very choiceful and using discretion" and are waiting for promotional events like Black Friday and Cyber Monday, he said, echoing comments made by Target CEO Brian Cornell on Wednesday.

Rainey said he still expected the company to "outperform relative to others in this holiday period."

Walmart shares were down 7% in premarket trading, a day after its stock hit an all-time high of $169.91 following results from rival Target, which projected fourth-quarter earnings above estimates.

Walmart's shares are up nearly 20% this year and are relatively more expensive than peers.

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Walmart now expects fiscal 2024 earnings per share of between $6.40 and $6.48, up from its prior forecast of $6.36 to $6.46.

It sees comparable sales for the full year rising in a range of 5% to 5.5%, compared with an increase of between 4% and 4.5% estimated previously.